Price and market trends: Brazil new tax could hit PET demand

08 May 2014 17:28 Source:ICIS Chemical Business

The Brazil government, as part of efforts to increase tax revenue, has surprised the beverage market by announcing increases in taxes for cold drinks in a move that could raise final costs for products made with polyethylene terephthalate (PET), market sources said on 2 May.

The government published the new tax information, effective June 1 that could represent an increase in the final cost to consumers of cold drinks of up to 2.25% from the current price, on average.

PET market sources told ICIS that the higher costs will definitely be immediately transferred to consumers, but did not estimate any potential demand lost.

New taxes on sugary drinks were imposed earlier this year in Mexico and represented a 10% increase in the final cost of drinks, many of them packaged in PET.

As a result, PET demand there fell. The weak internal PET demand, coupled with lower prices in other regions, has caused two reductions in Mexico PET prices so far this year.

PET prices in Brazil have seen a $25/tonne decline since the start of the year, in part as most of the market tracked declines in PET prices in Asia earlier 
this year.

Current PET prices in Brazil as assessed by ICIS are $1,865-1,965/tonne DEL (delivered).

By Renzo Pipoli